Post on 28-Mar-2018
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
__________________________________________ In re: ) Chapter 11 )
DAYTON SUPERIOR CORPORATION, ) Case No. 09-11351 (BLS) ) ) Related to D.I. Nos. 492, 496 Debtor. ) __________________________________________)
OBJECTION OF U.S. BANK NATIONAL ASSOCIATION TO APPROVAL OF THE FIRST AMENDED PLAN OF REORGANIZATION OF DAYTON SUPERIOR CORPORATION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
U.S. Bank National Association (“U.S. Bank”), as Indenture Trustee (the “Junior
Indenture Trustee”), for the Junior Convertible Subordinated Indenture dated as of October 5,
1999 (as supplemented, the “Junior Convertible Notes Indenture”), by and through its
undersigned counsel, respectfully submits this objection (the “Objection”) to the First Amended
Plan of Reorganization of Dayton Superior Corporation under Chapter 11 of the Bankruptcy
Code (the “Plan”)1 and the documents and procedures related thereto, and respectfully states as
follows:
Preliminary Statement
1. The Plan cannot meet the standards for confirmation under the Bankruptcy
Code for two reasons. First, the Plan strips the Debtor’s junior note holders, all of whom are
unsecured creditors, of their right to be treated in the same manner as other similarly situated
unsecured creditors. The Debtor has failed to establish a business justification for making a
distribution to some general unsecured creditors while providing nothing to other unsecured
1 Capitalized terms used but not defined herein shall have the meaning ascribed to them in the Plan.
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creditors–the holders of the Junior Convertible Notes (as defined below). The Debtor’s decision
to exclude subordinated note holders from a distribution is inappropriate. While contractual
subordination exists between the senior and junior note holders, no such obligation exists
between the Debtor and the junior note holders. The Debtor must treat its general unsecured
creditors and its junior note holders as equals. As such, distributions from the Plan should be
made to U.S. Bank, as the Junior Indenture Trustee, for the holders of the Junior Convertible
Notes. U.S. Bank will then comply with its contractual obligation to turnover the funds, after
exercising its charging lien, to the holders of the Subordinated Notes (as defined below).
2. Second, the Plan fails to account for and satisfy U.S. Bank’s
administrative expense claim. A plan that fails to pay all administrative claimants in full on the
effective date is not confirmable. The Debtor would have this Court believe that an indenture
trustee is definitively precluded from being paid an administrative expense for performance of its
statutorily mandated duties. However, U.S. Bank establishes herein that just the opposite is true.
3. For both of these reasons, U.S. Bank asserts that the Plan cannot be
confirmed unless these deficiencies are rectified.
Background
4. On April 19, 2009 (the “Petition Date”), the Debtor filed a voluntary
petition under chapter 11 of title 11 of the United States Bankruptcy Code (the “Bankruptcy
Code”) in the United States Bankruptcy Court for the District of Delaware.
5. The Debtor continues to operate its business and manage its properties as a
debtor-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No trustee
or examiner has been appointed.
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A. The Junior Convertible Note Indenture
6. U.S. Bank serves as the Junior Indenture Trustee pursuant to the Junior
Convertible Note Indenture, dated as of October 5, 1999, by and among Dayton Superior
Corporation, as issuer, and U.S. Bank, as successor to Firstar Bank, N.A. as indenture trustee,
pursuant to which convertible subordinate notes in the aggregate principal amount of
$21,887,500, which mature on September 30, 2029 and bear interest a rate of 10% per annum
(the “Junior Convertible Notes”), were issued and are outstanding. The outstanding principal
and pre-petition interest balance on the Junior Convertible Notes is $935,893.17.
7. The Junior Convertible Notes are not subordinate to general unsecured
creditors; rather, the Junior Convertible Notes are subordinate to “Senior Debt” which
specifically excludes non-recourse debt, debt between the Debtor and its subsidiaries, employee
obligations, taxes, trade debt and the Junior Convertible Notes themselves. See Junior
Convertible Notes Indenture at §1.1. A copy of the Junior Convertible Notes Indenture is
attached hereto as Exhibit A.
8. The Junior Indenture Trustee’s fees and expenses are also not
subordinated. Pursuant to Section 6.7 of the Junior Convertible Notes Indenture, “[t]he [Debtor]
agrees to reimburse the [Junior Indenture] Trustee upon its request for all reasonable expenses,
disbursements, and advances incurred or made by the [Junior Indenture] Trustee in accordance
with any provision of this [Junior] Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel).” Furthermore, Section 6.7 of the Junior
Convertible Notes Indenture states that “the expenses and compensation for the services are
intended to constitute expenses of administration under any Bankruptcy Reform Act of 1978 or
successor statute.” Significantly, Section 12.1 states that payment of the Junior Indenture
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Trustee’s fees and expenses are not subject to the subordination provisions of the Junior
Convertible Notes Indenture. “Notwithstanding the foregoing, any and all amounts payable to
the [Junior Indenture] Trustee pursuant to Section 6.7 are not subject to the provisions of Article
12.” See Junior Convertible Notes Indenture at §12.1, Debentures Subordinate to Senior Debt.
9. The Junior Indenture Trustee’s right to payment is secured by a charging
lien. “To secure the Company’s payment obligations in this Section, the Company and the
Holders agree that the Trustee shall have a lien prior to the Debentures on all money or property
held or collected by the Trustee.” See Junior Convertible Notes Indenture at §6.7.
10. The Junior Convertible Note Indenture also defines the Junior Indenture
Trustee’s role in the event of a bankruptcy filing by the issuer. While the role of the Junior
Indenture Trustee is predominantly administrative, an event of default by the issuer transforms
the Junior Indenture Trustee into a fiduciary. Pursuant to section 6.1(b) of the Junior Convertible
Notes Indenture, the Junior Indenture Trustee’s role converted from administrator to fiduciary
once a “Debenture Event of Default” occurred. “In case a Debenture Event of Default has
occurred and is continuing, the [Junior Indenture] Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree of care and skill in their exercise,
as a prudent person would exercise or use under the circumstances in the conduct of his own
affairs.” Junior Convertible Notes Indenture at § 6.1(b).
11. Section 5.1(f) of the Junior Convertible Notes Indenture defines a
Debenture Event of Default as including “the institution by the Company of proceedings to be
adjudicated as bankrupt ...”
B. The Plan
12. On August 25, 2009, the Court entered an order (i) approving the
Disclosure Statement, (ii) establishing the voting record date, voting deadline and other dates,
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(iii) approving procedures for soliciting, receiving and tabulating votes on the plan and for filing
objections to the plan and (iv) approving the manner and forms of notice and other related
documents.
13. The Plan divides the unsecured creditors into the following three classes:
Class 5 – Subordinated Note Claims:2 Class 5 will received 100% of the New
Stock of the reorganized Debtor in exchange for its conversion of $170 million of outstanding
notes. Class 5 is impaired and is entitled to vote.
Class 6 – General Unsecured Creditors: Class 6 will share in a pro rata
distribution of the General Unsecured Claims Cash Amount which consists of $1,787,323. The
Debtor projects that Class 6 will receive an estimated recovery of 20% on their claims. Class 6
is impaired and is entitled to vote.
Class 7 – Junior Convertible Notes Claims: Class 7 will not receive a distribution
and is not entitled to vote on the Plan.
14. Pursuant to Section 12.1 of the Junior Convertible Notes Indenture, the
Junior Convertible Notes are subordinated to the Class 5 Subordinated Note Claims. According
to the terms of the Junior Convertible Note Indenture, however, the creditors of Class 6 (General
Unsecured Creditors) and Class 7 (Junior Convertible Notes) are similarly situated general
unsecured creditors of the Debtor. The Plan inappropriately, and in violation of the Junior
Convertible Notes Indenture, subordinates the claims of the holders of the Junior Convertible
Notes to the general unsecured creditors of Class 5. This Court should not permit that to happen.
2 Although titled “subordinated,” these notes are senior to the Junior Convertible Notes pursuant to the terms
of their respective indentures.
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Argument
A. Treatment of Class 7 Violates Sections 1129(a), 1129(b) and 1122 of the Bankruptcy Code
15. The Court may only confirm the Plan if the Debtor proves by a
preponderance of the evidence that the Plan complies with section 1129(a) of the Bankruptcy
code. See In re Nutritional Sourcing Corp., 398 B.R. 816, 824 (Bankr. D. Del. 2008).
16. In this case, the Debtor cannot meet its burden because the separate
classification of Class 6 and Class 7 violates sections 1129 and 1122 of the Bankruptcy Code.
Section 1129(a)(1) of the Bankruptcy Code provides that a court may only confirm a plan if such
plan complies with the applicable provisions of the Bankruptcy Code, including section 1122.
Section 1122(a), in turn, permits the classification of claims and interests in a particular class
only if that claim or interest is “substantially similar” to other claims and interests of such class.
17. “Substantially similar claims” are those claims which share common
priority and similar legal rights against the estate. “[The Bankruptcy] Code was not meant to
allow a debtor complete freedom to place substantially similar claims in separate classes.” John
HancockMut. Life Ins. Co. v. Route 37 Business Park Assocs., 987 F.2d 154,158 (3d Cir. 1993).
Section 1129(b) of the Bankruptcy Code imposes on the Debtor the burden of proving the
existence of a valid business or economic justification for the separate classification of
substantially similar claims. See In re Exide Techs., 303 B.R. 48, 58 (Bankr. D. Del. 2003)
(citations omitted) (“[T]he plan proponent must also show that the plan meets the additional
requirements of § 1129(b), including the requirements that the plan does not unfairly
discriminate against dissenting classes and the treatment of the dissenting classes is fair and
equitable.”). In the absence of a valid business or economic justification, other than the limited
circumstance contemplated by section 1122(b), unsecured claims should generally be placed in
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the same class. See FGH Realty Credit Corp. v. Newark Airport/Hotel Ltd. Partnership, 155
B.R. 93, 99 (Bankr. D. N.J. 1993). To confirm a plan, the debtor must show there is a reasonable
basis for the debtor’s separate classification of general unsecured creditors and the debtor cannot
confirm a plan absent separate classification of unsecured creditors. See In re Exide Techs., 303
B.R. 48, 78 (Bankr. D. Del. 2003).
18. Here, general unsecured claimants and the holders of the Junior
Convertible Notes (the “Holders”) must be viewed as equally situated creditors that are entitled
to share pari passu in dividends from the Debtor. In New York Stock Exchange v. Pickard &
Co., Inc., 296 A.2d 143, 146 (Del. Ch. 1972), the Delaware Court of Chancery considered
whether there were priorities among subordinated lenders in determining how the subordinated
lenders should share in any distribution of the assets of a corporation in insolvency. In that case,
the court stated that, “[a]ny priority of claimants of the same class must be founded upon a
statute or upon the operation of some general rule of law.” Id. at 147. Because no statute
dictating the priority of the claimants applied, the New York Stock Exchange court looked to the
subordination agreements between the parties. Id. Before reviewing the relevant provisions, the
court observed that unless agreement provides otherwise, the agreement, “runs only between the
subordinated creditor and the senior creditors.” Id. Moreover, subordinated lenders “each
simply stand as a general creditor entitled to a ratable share of any distribution, subject to the
rights of senior creditors as specified in the agreement.” Id. at 148.
19. The subordination provisions in New York Stock Exchange were
enforceable as between the senior and junior lenders, not by the debtor. The subordination
provisions in the Junior Convertible Notes Indenture are applicable as between the holders of the
two series of notes, the Subordinated Notes and the Junior Convertible Notes. These provisions
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govern the ultimate disposition of the net proceeds of the Junior Convertible Notes Claims once
received. Because the term Senior Debt under the Subordinated Notes excludes unsecured
claims, the Debtor issued the Junior Convertible Notes with the same priority as the general
unsecured creditors. See Junior Convertible Notes Indenture at § 1.1. Thus, on the face of the
Debtor’s own bond issuance, the Junior Convertible Notes are not subordinated to the General
Unsecured Creditors of Class 6.
20. The subordination provisions do not eliminate the Debtor’s obligation to
make distributions with respect to the Junior Convertible Notes to the Junior Indenture Trustee.
This is true regardless of how the distribution may ultimately be disposed of pursuant to the
subordination provisions in the Junior Convertible Notes Indenture. The Class 6 General
Unsecured Claims and the Class 7 Junior Convertible Notes are general unsecured claims that,
from the Debtor’s perspective, are pari passu obligations of the Debtor’s estate as explicitly set
forth in the Junior Convertible Notes Indenture. The subordination provisions in the Junior
Convertible Notes Indenture do not support the Debtor’s attempt to eliminate the distributive
share allocable to the Junior Convertible Notes.
21. Accordingly, the Plan violates section 1129(b) of the Bankruptcy Code as
there is no business justification for classifying the Junior Convertible Notes Claims and the
General Unsecured Claims in different classes. Moreover, by providing for a distribution to the
General Unsecured Claims and providing nothing to the Junior Convertible Notes Claims, the
Plan unfairly discriminates among similarly situated creditors and violates the requirement that a
plan be fair and equitable. Finally, failure to make a distribution to the Holders deprives the
Junior Indenture Trustee of the right to exercise its charging lien pursuant to section 6.7 of the
Junior Convertible Notes Indenture. Because the Plan does not satisfy the requirements of
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sections 1122 and 1129(b) of the Bankruptcy Code, the Debtor cannot meet its burden under
section 1129(a)(1) of the Bankruptcy Code.
B. The Junior Indenture Trustee’s Fees and Expenses Must Be Given Administrative Priority
22. The Plan fails to provide for payment of the Junior Indenture Trustee’s
fees and expenses as an administrative expense of the Debtor’s estate. A plan is not feasible if it
does not account for payment of all administrative expenses. 11 U.S.C. § 1129(a)(4). If the Plan
is not feasible, it cannot be confirmed. In re Reading Broad, Inc., No. 05-26563, 2009 Bankr.
LEXIS 2593 (Bankr. E.D. Pa. Jan. 17,2009).
23. The Junior Indenture Trustee has provided actual and necessary costs of
preserving the Debtor’s estate after the Petition Date in accordance with section 503(b)(1) of the
Bankruptcy Code. Moreover, sections 503(b)(3)(D),3 503(b)(4),4 and 503(b)(5)5 of the
3 Section 503(b )(3)(D) of the Bankruptcy Code provides in pertinent part:
(b) After notice and a hearing, there shall be allowed, administrative expenses ... including ... (3) the actual, necessary expenses, other than compensation and reimbursement specified in paragraph (4) of this subsection, incurred by ... (D) ... an indenture trustee ... in making a substantial contribution in a case under chapter ... 11 of this title.
11 U.S.C. § 503(b)(3)(D). As the Indenture Trustee, U.S. Bank falls within the scope of section 503(b)(3)(D). See In re Worldwide Direct, Inc., 334 B.R. 112, 121 (Bankr. D. Del. 2005).
4 Section 503(b)(4) of the Bankruptcy Code allows for the payment of related attorney fees and expenses:
(b) After notice and a hearing, there shall be allowed, administrative expenses ... including . . . (4) reasonable compensation for professional services rendered by an attorney ... of an entity whose expense is allowable under subparagraph ... (D) ... of paragraph (3) of this subsection, based on the time, the nature, the extent, and the value of such services, and the cost of comparable services other than in a case under this title, and reimbursement for actual, necessary expenses incurred by such attorney or accountant[.].
11 U.S.C. § 503(b)(4). 5 Section 503(b)(5) specifically references indenture trustees and entitles the Indenture Trustee to reasonable
compensation based on substantial contribution:
(b) After notice and hearing, there shall be allowed, administrative expenses . . . including ... (5) reasonable compensation for services rendered by an indenture trustee in making a substantial contribution in a case under chapter . . . 11 of this title, based on the time, the nature, the extent, and the value of such services, and the cost of comparable services other than in a case under this title[.]
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Bankruptcy Code clearly provide that a debtor must pay the fees and expenses of an indenture
trustee, and those of its counsel, if the indenture trustee can show by a preponderance of the
evidence that it made a substantial contribution to the bankruptcy case. See In re FF Holdings
Corp., 343 B.R 84, 86-87 (D. Del. 2006).
24. The Junior Indenture Trustee has made a substantial contribution to this
chapter 11 case by providing an integral, statutorily-mandated service to the Debtor, a public
company debtor. Under the Trust Indenture Act of 1939, 15 U.S.C. § 77aaa, et seq. (the “TIA”),
an issuer of public debt such as the Debtor must have a qualified indenture with a qualified
trustee. The law is clear that a chapter 11 debtor’s obligations under federal securities laws –
including the TIA – continue unabated post-petition. See, e.g., SEC v. Brennan, 230 F.3d 65, 71
(2d Cir. 2000) (SEC enforcement fits within Section 362(b)(4)’s “police and regulatory power”
exception of the automatic stay); SEC v. Towers Fin. Corp., 205 B.R 27, 29-31 (S.D.N.Y. 1997)
(same); Bilzerian v. SEC, 146 B.R. 871, 872-873 (M.D. Fla. 1992) (same).
25. But for the services of the Junior Indenture Trustee, the Debtor would be
in violation of the Trust Indenture Act. Indeed, a debtor that fails to comply post-petition with
its regulatory obligations under the federal securities laws may be sued post-petition. See 28
U.S.C. § 959(a).6 The Debtor’s failure to comply with section 310 of the TIA could result in
severe penalties, including criminal and civil liability for the issuer. TIA Section 325 states:
Any person who willfully violates any provision of this subchapter or any rule, regulation, or order thereunder, or any person who wilfully, in any application, report, or document filed or required to be filed under the provisions of this subchapter or any rule,
11 U.S.C. § 503(b)(5).
6 Section 959(a) of title 28 provides in pertinent part:
“[Debtors] may be sued, without leave of the court appointing them, with respect to any of their acts or transactions in carrying on business connected with such property.”
28 U.S.C. § 959(a).
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regulation, or order thereunder, makes any untrue statement of a material fact or omits to state any material fact required to be stated therin or necessary to make the statements therein not misleading, shall upon conviction be fined not more than $10,000 or imprisoned not more than five years, or both.
15 U.S.C. § 77yyy. See also Zeffiro v. First Pennsylvania Banking and Trust Co., 473 F. Supp.
201, 206 (E.D. Pa. 1979) (stating that the Trust Indenture Act provides “for criminal liability for
certain willful violations and misrepresentations”); State v. Kreminski, 422 A.2d 294, 297, 178
Conn. 145, 151 (Conn. 1979) (stating that federal securities laws such as 15 U.S.C. § 77yyy
impose criminal liability for “willful” violations under the express terms of the penalty
provisions of the statute). There is also a private right to seek recovery for violations of the TIA.
See TIA Section 323.7 See also Zeffiro v. First Pennsylvania Banking and Trust Co., 623 F.2d
290 (3rd Cir. 1980) (holding that the Trust Indenture Act provides injured debenture holders with
a federal cause of action for the breach of terms mandated by the Act).
26. Under the Junior Convertible Notes Indenture, services must be provided
to the Debtor regardless of its financial status. The Debtor’s obligation to pay for this benefit
arises pursuant to the contractual undertaking set forth in the Junior Convertible Notes Indenture.
If the Debtor failed to employ an indenture trustee, it would be in clear violation of the TIA
exposing the Debtor to liability thereunder. The services provided by the Junior Indenture
7 TIA section 323 provides in pertinent part:
“(a) Any person who shall make ... any statement in any application, report, or document filed with the Commission ... which statement was at the time ... false or misleading with respect to any material fact, or who shall omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, shall be liable to any person (not knowing that such statement was false or misleading or of such omission) who, in reliance upon such statement or omission, shall have purchased or sold a security issued under the indenture to which such application, report, or document relates, for damages caused by such reliance, unless the person sued shall prove that he acted in good faith and had no knowledge that such statement was false or misleading or of such omission.”
15 U.S.C. § 77yyy.
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Trustee post-petition prevented the estate from being exposed to significant liability under the
TIA.
27. The Junior Indenture Trustee is aware of the court’s decision in In re PWS
Holding Corporation, 2002 WL 32332066 (Bankr. D. Del.), finding that an indenture trustee did
not qualify for payment of its fees as an administrative expense where the indenture trustee
argued that the TIA supported its administrative claim. However, reliance on the PWS case is
specious. The PWS case did not rule out the possibility that the TIA can be used to support the
allowance of indenture trustee’s fees as administrative expense. The PWS court merely found
that there was no evidence on the record that the duties of the indenture trustee promoted public
health and safety. Id at *2.
28. In PWS, the indenture trustee relied on Commonwealth of Pennsylvania,
Department of Environmental Resources v. Conroy, 24 F.3d 568 (3d Cir. 1994) to support its
position. The Junior Indenture Trustee does not have the same issue as the indenture trustee did
in PWS. First, the Junior Indenture Trustee does not rely on the Conroy decision for the
proposition that the Debtor must comply with the TIA; it relies on section 959 of title 28 of the
United States Code (“Section 959”).
29. Second, the Junior Indenture Trustee asserts that the PWS court’s
distinction between the debtor’s obligation to pay an indenture trustee from that of paying for
environmental remediation is a distinction without a difference. In Conroy, the Third Circuit had
to decide whether a printing company, after filing for bankruptcy, could abandon real property
that had become contaminated, in direct violation of Pennsylvania state law. In the Conroy case,
the court held that section 554 of the Bankruptcy Code, which deals with abandonment of
property by the debtor, does not preempt a state law that, “in a reasonable effort to promote
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public health or safety, prohibits the abandonment of property containing hazardous waste.”
Conroy at 569. Thus, the court ruled that amounts due and owing to the Pennsylvania
Department of Environmental Resources as repayment for work it caused to be performed in
order to keep a debtor’s property in compliance with state law is a valid 503(b)(1)(A) claim. The
Conroy case illustrates that filing for bankruptcy does not release the debtor’s obligation to abide
by applicable laws outside of bankruptcy, and that payments made in connection with these laws,
or to parties responsible for keeping the debtor in compliance, shall be afforded administrative
claim priority under 503(b)(1)(A) of the Bankruptcy Code.
30. The court in PWS distinguished the Conroy case stating, “there is no
evidence of record that the duties of the Indenture Trustee were of such importance that the costs
of fulfilling such duties should be accorded administrative expense priority.” In re PWS Holding
Corp., 2002 WL 32332066 at *2. While it is established that environmental damage presents a
risk to public health and safety, financial harm is equally detrimental to the public’s economic
health. Certainly this Court can take judicial notice pursuant to Federal Rule of Evidence
201(b)8 of the effects of financial misconduct on the country’s severe economic crisis.
31. At the time of its enactment in 1936, a time of equal, if not greater
financial peril than today, the TIA was intended to protect investors from financial harm. The
TIA was a congressional response to numerous reports of abuse in the public debt markets. “A
study was conducted by the Securities Exchange Commission (SEC) in 1936 which revealed
widespread abuses in the issuance of corporate bonds under indentures. The main problems
8 Federal Rule of Evidence 201(b) states:
Kinds of facts.—A judicially noticed fact must be one not subject to reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned.”
F.R.E. 201(b).
14
identified by the study were that the indenture trustee was frequently aligned with the issuer of
the debentures and that the debenture holders were widely dispersed, thereby hampering their
ability to enforce their rights.” Zeffiro v. First Pennsylvania, 623 F.2d at 292-293. Recent
events have proven that the potential for abuse still exits if left unchecked. Surely, it cannot be
in the public’s interest to weaken financial protections rather than enforce them. Consequently,
the Junior Indenture Trustee asserts that there is cause to enforce the TIA against the Debtor as
permitted by Section 959(a).
32. In addition to Section 959(a) which allows debtors to be sued for their
conduct while in bankruptcy, Section 959(b)9 requires a debtor to comply with all state laws
rather than only those laws that promote public health or safety.
Bankrupt debtors are no different from any citizen in that they must comply with state and federal laws. Section 959(b) of Title 28 of the United States Code provides that a trustee or debtor-in-possession “shall mange and operate the property in his possession . . . according to the requirements of the valid laws of the State in which such property is situated, in the same manner that the owner or possessor thereof would be bound to do if in possession thereof.” 28 U.S.C. § 959(b); Midlantic Nat. Bank v. N.J. Dept. of Envtl. Prot., 474 U.S. 494, 502, 106 S.Ct. 755, 88 L. Ed. 2d 859 (1986) (“Congress has repeatedly expressed its legislative determination that the trustee is not to have carte blanche to ignore nonbankruptcy law.”); In re CMC Heartland Partners, 966 F.2d 1143, 1146 (7th Cir. 1992) (“Having been a debtor in bankruptcy does not authorize a firm to operate a nuisance today, or otherwise excuse it from complying with laws of general application.”). See also N.L.R.B. v. Bildisco and Bildisco, 465 U.S. 513, 534, 104 S.Ct. 1188, 79 L. Ed. 2d 482 (1984) (A “debtor-in-possession is
9 Section 959(b) of title 28 states in pertinent part:
Except as provided in section 1166 of title 11, a trustee, receiver or manager appointed in any cause pending in any court of the United States, including a debtor in possession, shall manage and operate the property in his possession as such trustee, receiver or manager according to the requirements of the valid laws of the State in which such property is situated, in the same manner that the owner or possessor thereof would be bound to do if in possession thereof.
28 U.S.C. 959(b).
15
not relieved of all obligations under the National Labor Relations Act simply by filing a petition for bankruptcy.”).
In re Am. Coastal Energy, Inc., 399 B.R. 805, 810 (Bankr. S.D. Tex. 2009).
33. The combination of Section 959(a) and Section 959(b) makes it perfectly
clear that Congress is not willing to give debtors in bankruptcy a free pass to ignore applicable
non-bankruptcy laws. The Debtor must comply with the TIA.
34. Compliance with the TIA requires the services of the Junior Indenture
Trustee and the terms of the Junior Convertible Note Indenture impose fiduciary duties on the
Junior Indenture Trustee once an event of default occurs. Failure to act would violate the Junior
Indenture Trustee’s fiduciary duties but resigning would subject the debtor to criminal and civil
liability under the TIA. It is imperative that the Junior Indenture Trustee uphold its fiduciary
duties for both the Debtor and the Holders.
35. Thus, because the Debtor must adhere to its obligations under the TIA,
regardless of whether it filed for bankruptcy, all costs of doing so are afforded administrative
expense status under 503(b)(1)(A), including the fees of the Junior Indenture Trustee.
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Conclusion
WHEREFORE, for the above reasons, U.S. Bank requests that the Court sustain
its Objection to the Plan and deny Confirmation, unless and until Class 7 is provided the same
treatment as Class 6 and the Indenture Trustee’s fees are paid as administrative claims.
Dated: October 1, 2009
KELLEY DRYE & WARREN LLP By: /s/ James S. Carr
James S. Carr (JC 1603) Eric R. Wilson (EW 4320) Gabrielle Albert Rohwer
101 Park Avenue New York, New York 10178 Tel: (212) 808-7800 Fax: (212) 808-7894 Email: ewilson@kelleydrye.com grohwer@kelleydrye.com Counsel for U.S. Bank National Association, as Junior Indenture Trustee
CERTIFICATE OF SERVICE I certify that, on October 1, 2009, I caused a copy of the OBJECTION OF U.S. BANK
NATIONAL ASSOCIATION TO APPROVAL OF THE FIRST AMENDED PLAN OF REORGANIZATION OF DAYTON SUPERIOR CORPORATION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE to be served via facsimile to the following persons: Joseph S. Fabiani, Esquire LATHAM & WATKINS LLP 885 Third Avenue, Suite 1200 New York, NY 10022 Fax (212) 751-4864
Lee E. Kaufman, Esquire RICHARDS, LAYTON & FINGER, P.A. One Rodney Square P.O. Box 551 Wilmington, DE 19899 Fax (302) 651-7701
Erez Gilad, Esquire STROOCK & STROOCK & LAVAN LLP 180 Maiden Lane New York, NY 10038 Fax (212) 806-2562
Robert J. Dehney, Esquire MORRIS, NICHOLS, ARSHT & TUNNELL 1201 North Market Street P.O. Box 1347 Wilmington, DE 19899 Fax (302) 658-3989
Laura Davis Jones, Esquire PACHULSKI, STANG, ZIEHL, & JONES LLP 919 N. Market Street, 17th Floor P.O. Box 8705 Wilmington, DE 19899-8705 Fax (302) 652-4400
Sarah Robinson Borders, Esquire KING & SPALDING LLP 1180 Peachtree Street, N.E. Atlanta, GA 30309 Fax: (404) 572-5100
Christopher Marcus, Esquire KIRKLAND & ELLIS LLP 601 Lexington Avenue New York, NY 10022 Fax (212) 446-4900
Stephen M. Miller, Esquire MORRIS JAMES LLP 500 Delaware Avenue, Suite 1500 P.O. Box 2306 Wilmington, DE 19899-2306 Fax (302) 571-1750
Mark Kenney, Esq. Office of United States Trustee 844 King Street Suite 2207 Wilmington, DE 19801 Fax (302) 573-6497
/s/ Kristin Elliott Kristin Elliott